An armed standoff between government forces and the group entered its second
day after a confrontation between Pravy Sektor and men loyal to a local MP
critical of the group turned violent

A standoff was under way between government forces and members of the far-Right paramilitary group Pravy Sektor (Right Sector) on Sunday after the militia reportedly launched a gun and grenade attack in a western Ukrainian town and later demanded the resignation of the country's interior minister.

Army troops and police surrounded Pravy Sektor's bases in the area following the battle in the town of Mukachevo on Saturday, which appeared to have erupted after its fighters confronted men loyal to a local MP critical of the group.

At least two Pravy Sektor fighters were killed and seven people injured in the fighting, which also saw two police cars destroyed by grenade launchers.

An unknown number of Pravy Sektor fighters were still believed to be hiding in countryside near the town, close to the Polish and Hungarian borders, on Sunday evening.

Mr Yarosh said in a conciliatory statement on his Facebook page that he would “promote an objective and impartial investigation” into the gun battle in order to avoid “the danger of destroying Ukraine as a unified state”.

Supporters and members of the Right Sector party attend a rally in front of the regional Interior Ministry building in Mariupol (EPA)

But he went on to issue a string of demands, including the arrest of Mikhail Lano, the member of parliament who openly opposes the group, and the resignation of Arsen Avakov, Ukraine’s interior minister, along with the entire leadership of the regional police force.

Mr Yarosh was engaged in direct negotiations with Petro Poroshenko, the Ukrainian president, and the head of the SBU, Ukraine's interior security service, on Sunday evening. Officials have called on the group to surrender or face arrest.

Government special forces reportedly postponed a planned assault on the surrounded fighters on Saturday night to allow negotiations to take place.

But as tensions grew on Sunday, Pravy Sektor said its bases in western Ukraine had been “blockaded” by police and government troops.

The precise origins of the violence were unclear on Sunday, as were the details of the standoff.

Andrei Tarasenko, a deputy leader of the group, said the Pravy Sektor fighters involved in Saturday's incident were now "in the mountains".

"I can't tell you how many of them are there, we have lost contact," he told Kiev-based Hromadske television. But another spokesman, Artem Skoropadsky, said the fighters were camped out in a forest and did not intend to surrender.

Another Pravy Sektor leader said the group had established a checkpoint on a main road outside Kiev in order to prevent security services from being sent west to hunt the fugitives.

Pravy Sektor said its men were attempting to disarm an “illegal armed formation” loyal to Mr Lano, who in turn claimed the violence broke out when members met with him to ask for help arranging sanatorium stays for men injured in the eastern conflict zone.

Police officers blocks the traffic near the western Ukrainian city of Mukachevo (AP)

But Mustafa Nayyem, a Ukrainian MP and investigative journalist who arrived on the scene on Saturday, said the violence was sparked by dispute over control of the contraband cigarette trade.

Citing local residents, Mr Nayyem said “all sides in the conflict” had been involved in a profitable cigarette smuggling business that sees between three and five lorries pass through the region’s border crossings en-route to Germany and Italy each week.

Russia has bitterly criticised Mr Poroshenko's government for its tolerance of and cooperation with the group, and regularly cites Pravy Sektor as evidence that the postrevolutionary government in Kiev is dominated by fascists.

The Russian foreign ministry's envoy for human rights, Konstantin Dolgov, renewed that criticism amid the standoff. "Pravy Sektor has again shown its bandit face in Mukachevo. In Kiev, they don't want to break with neo-Nazis," he wrote on Twitter.

A member of Mr Poroshenko's parliamentary bloc, Irina Friz, meanwhile said on Facebook: "I don't exclude the presence of Russian traces in the incident ... as this region is in the zone of interest for Russian special services."

Around 200 supporters of Pravy Sektor, many in military dress, gathered in front of the presidential offices in Kiev as the standoff unfolded.

Two of the most powerful volunteer battalions involved in the war against Russia-backed rebels in east Ukraine have spoken out in support of Pravy Sektor.

In separate statements, the Donbass and Azov battalions called for the situation in Mukachevo to be resolved “without use of force”.